In spite of the political and economic uncertainty as a result of government actions recently, the South African business sector remains committed to working with the government and other stakeholders to restore confidence in the economy. However, the rules of the game changed as a result of the President's actions in March this year, and the onus is firmly on government to rebuild confidence and trust and agree to protocols to inform collaboration going forward.
This is according to Cas Coovadia, Managing Director of the Banking Association of South Africa (BASA). Coovadia, speaking at the annual Nedgroup Investments Treasurer’s Conference in Johannesburg last week, says in spite of the recent political upheaval, the mandate from about 70 of the CEOs in the CEO Initiative is clearly to continue with the initiative, because it is in the national interest.
“Generally, the South African business sector has taken the view that business should not get involved in politics. However, the recent impact of political actions on the business environment has had an immediate and negative affect and it has been necessary for business to respond accordingly,” says Coovadia.
Coovadia highlights three watershed events that have informed a fundamental shift in the relationship between business and government in the past two years:
- November 2015: "Nenegate"
- March 2017: Aborting of roadshow led by Minister Gordhan and cabinet reshuffle
- May 2017: Ratings agencies downgrade South Africa’s credit rating to sub-investment grade
“The overarching effect of these three events caused business to become more robust in their interactions with government,” he says.
Coovadia explains that in 2015 business intervened directly to impress upon the president the need for a finance minister with international and national recognition and respect.
“This resulted a review of the decision to appoint the finance minister at the time – which resulted in the appointment of Pravin Gordhan as Finance Minister. Then, business joined forces to work with the minister and others in government to avoid a ratings downgrade. This collaboration was under the direction of the President," he says.
“Together and through effective collaboration between government, business and labour, the downgrade was avoided. We looked for green shoots in the economy, opted together to establish the SME fund, started work on a youth employment initiative and consolidated the role of the CEO Initiative,” says Coovadia.
However, in March this year all of those gains were called into question with the recalling of the finance minister and his team from the international road show and the midnight cabinet reshuffle. According to Coovadia, the massive amount of value that was lost instantaneously in the banking sector made it clear that the rules of the game had changed.
"At this point, South African business took the action of drawing a line in the sand,” he says.
Coovadia says the South African business sector is, in the current environment, choosing to promote and protect good governance and ethical behavior, not just in government but also in business. “We recognised the President’s prerogative to reshuffle his cabinet, but we strongly criticised the way he did it.”
According to Coovadia, one of the key issues around this debate is the issue of transformation in the industry. “We must embark on a process of robust and honest introspection about the way we conduct our business. This includes inclusion of SME's in procurement, enabling greater transactional activity and broadening our pool of service providers to include black firms. We also need to look at the profile of our senior management cohort. The industry has made great strides in many of these, but we must be frank and robust in assessing transformation, identifying blockages and dealing with these and talking about our successes,” he says.
Coovadia also spoke to a few of the key issues affecting corporate treasurers currently such as the finalisation and implementation of twin peaks, the levies bill and work being done in the credit and debt relief space.